Similarly to gasoline importers, the Association of Flour Mills is finding it increasingly difficult to secure the requisite U.S dollars needed to pay for the import of wheat.
by Georgi Azar -Source: Annahar
BEIRUT: Wheat importers are the latest group to sound the alarm over the scarcity of U.S dollars in the market, calling on officials to intervene before further disruption becomes inevitable.
Similarly to gasoline importers, the Association of Flour Mills is finding it increasingly difficult to secure the requisite U.S dollars needed to pay for the import of wheat.
“The difficulty of converting Lebanese pounds to dollars is beginning to negatively affect our production, which is sold in Lebanese pounds,” a statement released Tuesday read.
Banks have shown restraint in selling U.S dollars, as slowing remittances and the threat of a wide-scale capital flight continue raising the threat of a potential financial collapse.
“Despite discussions with concerned officials to find a solution to the problem, our pleas are falling on deaf ears,” the statement continued.
Wheat importers, like gas station proprietors, have been forced in some instances to hit money exchange houses, which have exploited the current state of affairs to charge rates well above the official peg of 1,507.5 Lebanese pounds to the dollar. In certain cases, rates can reach 1,550 Lebanese pounds to the dollar.
The rise of black market rates has also brought into the fold ordinary citizens, with a number of Lebanese buying dollars from banks and selling them to vendors, pocketing the change. This has also played a role in banks limiting ATMs withdrawals in recent days.
This, the Association of Flour Mills said, has led them to issue bills in U.S dollar to “preserve operational capital and continue securing the country’s flour needs.”
Wheat supply levels have fallen to “dangerous levels,” it said, which could expose Lebanon to a possible crisis if a solution is not found.
“We call on officials at the highest level to help us secure U.S dollars at the official price.”
Lebanon currently finds itself in a precarious predicament, as it reels under the burden of the world’s third-highest debt to GDP ratio, high unemployment and little growth.
Its budget deficit reached 11.5 percent of GDP in 2018, which needs to be slashed to less than 7 percent by 2020 to appease international donors.
Last week, gas station owners called a general strike to protest the brunt of high exchange rates. Cars lined up across Lebanon’s gas stations Wednesday, as Lebanese motorists braced for a cut off the next day.
Monday, Prime Minister Saad Hariri met with gas station owners vowing to “find a solution to the problem within the next 24 to 48 hours.”
Speaking following the meeting, George Fayyad, a representative of the Association of Petroleum Importing Companies, the Syndicate of Gas Station Owners and the Syndicate of Tankers, suspended the strike until Thursday, when another meeting is scheduled with the premier.
According to S&P’s estimates, Lebanon’s usable FX reserves could fall to $19.2 billion by the end of 2019, down from $25.5 billion a year earlier. In 2017, Lebanon had at its disposal $32.5 billion in usable FX reserves.
To counter this trend, Banque Du Liban Governor Riad Salameh has undertaken a number of complex financial engineering operations, as well as securing a $1.5 billion dollar boost in late August from private depositors.
In a news conference Monday, Salameh denied the existence of a “dollar-crisis,” saying that “dollar liquidity is intact and there is no need for special procedures on this matter.”